Anyone else get a sense of deja vu? Following CBOE's fail this morning, now BATS and NASDAQ have declared self-help against the CBOE...
- *CBOE HAS NO FURTHER COMMENTS REGARDING ITS COMPUTER SYSTEMS
- *CBOE INVESTING CURRENT DIFFICULTIES, SPOKESPERSON SAYS
As of 10:02AM CT, *CBOE’S C2 AND CBSX HAS HALTED TRADING
Still paying your 2-and-20, despite Stanley Druckenmiller's surprise that you would, for someone to pick stocks for you? Perhaps a glance at the following 3 charts will awaken the animal investing spirits in some (or just a 'fold' from many). This is what happens when there is only one economic market-driving factor (cough Fed cough) and too many coat-tail-clinging hedge fund managers (and newsletter writers) chasing too few real alpha opportunities. The correlation between the S&P 500 and hedge fund returns has never been higher and is approaching 1, excess return (alpha) is near its all-time lows, and, sadly, there is an extremely high correlation between styles and tilts. All your hedge fund alpha are belong to Ben.
This is the first consecutive monthly drop in 14 months and the largest miss vs expectations on record. Printing at 76.8 (against an expectation of 82.0), this is the lowest in 5 months and points to the picture we have been painting of a consumer increasingly affected by rising rates and soaring gas prices amid stagnant incomes. As Citi notes below, this is the exact same pattern we have seen play out in the last 2 cycles and suggest significant downside risk to US equities. The economic outlook sub-index collapsed to its lowest since January.
Sept. 11, 2013, marked the anniversary of the attack on the U.S. Consulate in Benghazi, Libya, that left four U.S. diplomatic employees - including Ambassador Chris Stevens - dead. The anniversary saw new attacks in the eastern Libyan city, this one against a Libyan Foreign Ministry building (and this morning's awful attack in Afghanistan). The anniversary and recent attacks prompt a look at how the security situation in Benghazi has evolved over the past year, and at how the United States has tackled security issues worldwide since the consulate attack.
No surprises here: Silver and Gold are the best, Banks and Greece - worst.
For those interested in seeing a standout example of the resource misallocation resulting from 5 years (and running) of central planning, we present the following pair of data sets: restaurant workers, which in August just hit an all time high of 10.4 million, and restaurant retail sales, which moments ago we found continued to slow on a year over year basis, and at this pace in a few months, will postits first Y/Y decline since early 2010.
The all important retail sales report, the final economic data point before next week's taper announcement, has just come and it was a disappointment, printing at just 0.2% for the month of August, down from an upward revised 0.4% in July, and below the 0.5% expected. Excluding the government loan-funded autos and volatile gas sales, retail sales barely rose, increasing at the lowest possible pace, or 0.1%, and below the expected 0.3% rate, and well below the revised 0.6% from July. General merchandise stores went so far to post a -0.2% dip. However, the most notable number is likely the -0.9% drop in building and garden material sales, which is a screeching halt to the recent upward bias in home renovation, and further evidence that the recent cheap-credit fueled housing bubble has finally popped. As for clothing retailers: with a -0.8% drop in August, don't expect a rebound any time soon. So much for retail strength. But hey: at least consumers have stocks they can buy... at all time highs.
Earlier today, when we observed the overnight "news" floated by Japan's Nikkei we cautioned that the Nikkei is best known not for breaking news but for floating trial balloons. In other words, the report was merely leaked to gauge the market response. Sure enough, the response was gauged, and here comes the official news, shooting down this latest trial balloon.
- White House Is Saying Reports In Japanese Press That Obama Is Set To Name Larry Summers Are Wrong - Dow Jones
Sure enough, any modest USD strength accumulated on the overnight rumor, is now being promptly unwound.
- U.S., Russia to push for new Syria peace talks (Reuters)
- Elite Syrian Unit Scatters Chemical Arms Stockpile (WSJ)
- Obama to nominate Summers as Fed chief: Nikkei (Reuters)
- Boehner Wants Joint Talks on Debt, Budget (WSJ)
- House Republicans go for broke in fiscal battles (Reuters)
- Pimco, BlackRock Together Received More Than a Quarter of Verizon's $49 Billion Bond Deal (WSJ)
- Insane financial system lives post-Lehman (Gillian Tett)
- JPM to add $2.5 billion to its litigation reserves in the second half of the year (WSJ)
- Goldman’s Zurich offices visited over working-hours complaint (FT)
Overnight asset classes got a jolt following a report by Nikkei that Obama was moving toward naming Summers the next Fed chairman, citing “several close US sources,” pushing stocks modestly lower in Europe, with bond yields higher. According to the report, Obama is to name Summers as next Fed chairman as early as late next week, after the Federal Open Market Committee meeting. Otherwise, risk is still digesting the news of the confidential Twitter IPO, as it is becoming quite clear that some of the largest names (Hilton also announced yesterday) are seeking to cash out in the public markets. Is this the top?
Two years after insurgents attacked the main U.S. embassy and NATO headquarters in the heart of Kabul, killing at least nine people in a battle lasting several hours as attackers fired from a partially constructed building, and one year after the infamous Benghazi consulate attack which resulted in the deaths of Americans, overnight yet another attack was staged against US property in Afghanistan, this time the US consulate in Herat, western Afghanistan's main city, where detonated a powerful bomb outside the front gates and launching a gunbattle with security forces. At least three people were killed, however none of them Americans. The attack began at about 6 a.m. (0150 GMT). A Reuters witness said he saw flames in front of the compound rising from the wreckage of the vehicle and could hear the gunbattle as the attack unfolded.
Following Barroso's State of the EU speech, we thought it useful to reflect on the true state of the EU. Nigel Farage's recent tirade slamming "Communist" Barroso's pro-bureaucrat policies are poignant as he exclaims the "disaster" that the EU has become for the poor and unemployed. To further color this rant we note Charles Gavekal's recent note on why Europe's still broken as worthless IOUs are 'transferred' around the union and "no one really knows who is going to take the final loss." Perhaps it is The Hamiltonian's summary of the structural problem (an interlocking set of European political, bureaucratic, media, academic and financial elites) and the sad fact that history suggests a crisis deferred is a crisis magnified.
"We’re diverted totally from what this bill is about. Why? Because the anarchists have taken over. They’ve taken over the House and now they’ve taken over the Senate... People who don’t believe in government - and that’s what the Tea Party is all about - are winning, and that’s a shame." - Harry Reid on the Senate Floor earlier today.
The best thing about inept, crony, powerful politicians is that when they realize they are losing the battle for the hearts and minds of the public they simply don’t know what to do. We suppose it’s also anarchic to want to not start World War III, right Harry? Enjoy!